Informix can't win for losing

Database maker Informix, which is
struggling to turn itself around and rebuild Wall Street's confidence after having to restate its financial results going back several years, said it now must restate its first-quarter profits to reflect a loss.

The move comes after Informix had posted back-to-back profits in the first
and fourth quarters, taking analysts--who had expected a loss--by surprise.

Informix said it will restate its previously announced first-quarter profits
of $4.9 million to reflect a loss of $400,000, a company spokesman said.

Revenues, which previously were reported at $167.2 million for the first
quarter, will be reduced by $6.2 million. That $6.2 million, however, will
be evenly deferred over 1998 and 1999.

Although Informix revamped its revenue-recognition policies last November to make them more conservative, the figures now being restated fell into a category whose revenue-recognition method hadn't been revised.

Software sales to industrial manufacturers like Octel Communications were counted as a
sale to an end user. But because industrial manufacturers like Octel
incorporate Informix software into their products before shipping them to their
customers, the spokesman said Informix was told by its former auditors, Ernst & Young, that the transaction should have been accounted for as a sale to a reseller, rather than to an end user.

As a result, Informix agreed to count revenues only after its products are shipped to the customers of its industrial manufacturers, a strategy that is considered more conservative.

Ernst & Young raised its concerns about Informix's current accounting practices a day after it was dismissed as the company's auditor. Ernst & Young served as Informix's auditors during the period in which Informix was forced to restate its results from prior years.

Informix chief financial officer Jean-Yves Dexmier said the move to restate the
first-quarter results should send a strong message to Wall Street that Informix is a conservative company when it comes to counting its revenues.

"We didn't want an open debate, or questions on whether this company is
conservative," Dexmier said. "We decided to take action immediately so that
we could send a strong message."

One analyst applauded the company's decision to restate the first-quarter
results and said the restatement should not affect Informix's relationship with Wall
Street.

"It really appears that management is trying to clean up all its accounting
irregularities," said Stephen Dube, an analyst with Wasserstein Perella
Securities. "This incident is just one that passed through the door, but
one they are trying to clean up."

He added that Informix management is working to be "pristine pure" when it
reports its quarterly results. Dube said the restatement will not prompt him to change his recommendations or earnings estimates on the company.

The Securities and Exchange Commission, meanwhile, is reviewing the "3.5 tons" of documents that Informix sent the agency for its pending investigation of the company. The materials cover four years of Informix's financial data. Dexmier said Informix is cooperating with the SEC and does not know when the matter will be resolved.